She was billed as the only one who could steal this election from Nicolas Sarkozy. The media had dubbed her “the queen of the polls”, so towering was her popularity over her socialist rivals for the party’s nomination. She was strikingly beautiful (for a politician), feminine yet tough, motherly yet authoritative, reassuring yet unafraid to break taboos. She was all at once Delacroix’s Liberty Leading the People, and Joan of Arc. Ségolène Royal had the look and feel of France’s itself. She couldn’t lose. She would crush Sarkozy’s ambition like she had trampled on her own party’s heavyweights, with a smile.
However, through months and months of this media hype, prediction traders remained skeptical. The price of the “President-Royal” contract only briefly caught up with Sarkozy’s just before the official campaign started, then collapsed.
The most interesting “prediction market moment” of the campaign happened just a few days before the final May 6 vote. On May 2nd, Royal and Sarkozy faced off in the first and only televised debate. By this time, Sarkozy was well in the lead, trading at 80% to Royal’s 20%, but any slip-up, any gaffe could have dramatic effects on the voting just four days later…
The candidates were facing each other. Royal, dressed to kill in black and white, never looked more righteous and “presidential”. When she wasn’t speaking, whe was staring down Sarkozy as if to project her implacable will upon the enemy of the people, a technique she had learned from her mentor, François Mitterrand (who had used it successfully against Jacques Chirac). Sarkozy responded by looking subdued, avoiding eye contact with his rival, slightly hunched like a scolded child; A far cry from the hot-tempered, conquering, Napoleonic character everyone had expected to witness. When Royal, in a fit of “righteous anger” accused him of being “immoral”, he kept his head down and barely responded.
After the debate, the pundits were all agreed that Royal had scored some points, and even die-hard Sarkozy fans openly worried that Royal had bested their champion. The next morning, newspapers and radio stations still conveyed the impression that Royal’s performance had probably helped her. However, the trading pattern one could observe on NewsFutures and other prediction markets told a different story altogether. The price of Sarkozy’s contract actually rose a little during the debate and just after, as evidenced in the chart at left. The next morning, this gain held, even as political pundits on the radio stations were still praising Royal’s performance. The disconnect continued until the afternoon, when the results of a poll taken just after the debate showed that it was Sarkozy that had come out on top, confirming the market’s impression.
So, once again, prediction markets performed quite well in an electoral context. This, of course, won’t come as a big surprise to anyone familiar with the field.
Perhaps the more interesting observation in this case is that Ségolène Royal had embraced a “participative” campaign style that very much drew on the “widsom of the crowds”. Her campaign rallies were organised as bottom-up “listening” events designed to extract themes and practical solutions directly from the people themselves. She would ceaselessly repeat that “people are the best experts of what they are living through”. When pressed to give her opinion on a controversial issue, she would often reply that, as President, rather than imposing her views from the top down, she would invite all concerned parties to debate and come up with a proper solution. It is ironic that, in the end, the crowd itself preferred to trust the more authoritarian, decisive, top-down candidate. There is a lesson here about democracy: The crowd demands to be able to choose its leaders, regularly, but then it expects them to lead, not follow.